Monday, March 30, 2009

Canadian leadership on the auto file

The federal and Ontario governments have committed to provide $4-billion in short-term loans to General Motors of Canada Ltd. and Chrysler LLC, but the two companies must negotiate deeper savings from their workers and suppliers before the governments agree to a long-term restructuring plan.

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Ottawa insists that, while the short-term loans are not “risk-free,” they are well secured by the Canadian assets of both companies. As well, the Canadian governments will receive warrants that can be converted to GM shares, and additional guarantees from Detroit-based, privately owned Chrysler. (emphasis added)

Michael Ignatieff was probing the issue in the House of Commons of whether automaker assets in Canada have in fact been pledged to the U.S. government as collateral for U.S. loans. It is unclear why there seems to be a discrepancy. If it is the case, it seems like quite the exposure for the Canadian government.

Update (8:30 p.m.): Here's Aaron Wherry's summary of the issue raised in the House of Commons, with no response from Clement:

Ignatieff insisted on repeating his request for factual information. “Last week, GM testified to the auto subcommittee that it had committed all of its worldwide assets, including its assets in Canada, as collateral for U.S. loans to keep its American operations alive. That may mean that the government’s loans to GM Canada are going to be unsecured and Canadian taxpayers are going to be on the hook,” he said. “The government was not at the table. It did not stand up for taxpayers. It did not stand up for Canadian workers. Why not?”

Clement, whose two degrees from the University of Toronto are of no consequence to this discussion, suggested Mr. Ignatieff was eager to see several hundred thousand people put out of work.

“Mr. Speaker, I take this to be ‘no,’ the loans are unsecured and I await contradiction,” Ignatieff shot back.